**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-QSB**






(Mark
      One)


x QUARTERLY
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For
      the
      quarterly period ended September 30, 2007




OR





o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
      the
      transition period from to





Commission
      file number 000-30785







**CAMELOT
      ENTERTAINMENT GROUP, INC.** (Exact
        name of registrant as specified in its charter)






**Delaware**
            **52-2195605**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)







**2020
      Main Street #990**


**Irvine,
      CA 92614**


(Address
      of principal executive offices (zip code))





**(949)
      777-1090**


(Registrant's
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) filed all reports required to be filed
      by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the last
      12
      months (or for such shorter period that the registrant was required to file
      such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.




Yes xNo
o








As
      of
      November 16, 2007, the Registrant had outstanding 140,795,717 shares of Common
      Stock, $0.001 par value.


1





**CAMELOT
      ENTERTAINMENT GROUP, INC.**


**INDEX
      TO FORM 10-QSB**





**PART
                  I. FINANCIAL INFORMATION**Item
                  1. Financial Statements (Unaudited)
            4Balance
                  Sheets as of September 30, 2007 and as of December 31,
                  2006
            4Statements
                  of Operations for the three and nine months ended
                  September  30, 2007 and 2006
            5Statements
                  of Changes in Stockholders’ Deficit from January 1, 2004
                  to September 30, 2007
            6Statements
                  of Cash Flows from the period of inception (April 21, 1999)
                  through September 30, 2007 and for the nine months ended September
                  30, 2007 and 2006
            8Notes
                  to Financial Statements
            9Item
                  2. Management’s Discussion and Analysis of Financial Condition and Results
                  of Operations
            12Item
                  3. Quantitative and Qualitative Disclosures About Market
                  Risk
            18Item
                  4. Controls and Procedures
            18**PART
                  II. OTHER INFORMATION**
            18Item
                  1. Legal Proceedings
            19Item
                  2. Changes in Securities and Use of Proceeds
            19Item
                  3. Defaults Upon Senior Securities
            19Item
                  4. Submissions of Matters to a Vote of Security
                  Holders
            19Item
                  5. Other Information
            19Item
                  6. Exhibits
            19Signatures:
            20


























2





THIS
      REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
      OF
      SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND WITHIN THE MEANING
      OF
      SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE
      SUBJECT TO THE "SAFE HARBOR" CREATED BY THOSE SECTIONS. THESE FORWARD-LOOKING
      STATEMENTS INCLUDE BUT ARE NOT LIMITED TO STATEMENTS CONCERNING OUR BUSINESS
      OUTLOOK OR FUTURE ECONOMIC PERFORMANCE; ANTICIPATED PROFITABILITY, REVENUES,
      EXPENSES OR OTHER FINANCIAL ITEMS; AND STATEMENTS CONCERNING ASSUMPTIONS MADE
      OR
      EXCEPTIONS AS TO ANY FUTURE EVENTS, CONDITIONS, PERFORMANCE OR OTHER MATTERS
      WHICH ARE "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS DEFINED UNDER THE FEDERAL
      SECURITIES LAWS. ALL STATEMENTS, OTHER THAN HISTORICAL FINANCIAL INFORMATION,
      MAY BE MARKET TO BE FORWARD-LOOKING STATEMENTS. THE WORDS "BELIEVES", "PLANS",
      "ANTICIPATES", "EXPECTS", AND SIMILAR EXPRESSIONS HEREIN ARE INTENDED TO
      IDENTIFY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE SUBJECT
      TO
      RISKS, UNCERTAINTIES, AND OTHER FACTORS, WHICH WOULD CAUSE ACTUAL RESULTS TO
      DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. FORWARD-LOOKING
      STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "FACTORS THAT
      MAY
      AFFECT FUTURE RESULTS," AND ELSEWHERE IN THIS REPORT, AND THE RISKS DISCUSSED
      IN
      THE COMPANY'S OTHER SEC FILINGS.






































































































3





**Camelot
                Entertainment Group, Inc.**Balance
                SheetsUnaudited**ASSETS**September
                30,
            
            
            December
                31,2007
            
            
            2006Current
                AssetsCash
            
            $
            596
            
            
            $
            435,533Prepaid
                Expenses
            
            
            6,424
            
            
            
            6,424Total
                Current Assets
            
            
            7,010
            
            
            
            441,957School
                District Deposit
            
            
            50,000
            
            
            
            -Deferred
                Financing Costs
            
            
            62,406
            
            
            
            74,744Loan
                Receivable
            
            
            17,500
            
            
            
            17,500Scripts
                Costs
            
            
            79,700
            
            
            
            75,800Deposit:
                Business of Film
            
            
            60,000
            
            
            
            10,000Total
                other assets
            
            
            269,606
            
            
            
            178,044Total
                Assets
            
            $
            276,626
            
            
            $
            620,001**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                LiabilitiesAccounts
                Payable and accrued liabilities
            
            $
            664,317
            
            
            $
            140,625Note
                Payable, net of discount $15,256
            
            
            284,744
            
            
            
            250,000Stockholder
                advances
            
            
            31,436
            
            
            
            186,000Total
                Current Liabilities
            
            
            980,497
            
            
            
            576,625Long
                Term LiabilitiesSecured
                Note Payable, net of discount $709,177 and $598,497
            
            
            240,090
            
            
            
            1,521Derivative
                Liability - Compound
            
            
            306,632
            
            
            
            538,890Derivative
                Liability - Warrant
            
            
            28,307
            
            
            
            698,390Total
                Long Term Liabilities
            
            
            575,029
            
            
            
            1,238,801Total
                Liabilities
            
            
            1,555,526
            
            
            
            1,815,426Stockholders'
                DeficitCommon
                Stock; Par Value $.001 Per Share; Authorized300,000,000
                Shares; 140,795,717 SharesIssued
                and 106,655,743 Outstanding.
            
            
            140,795
            
            
            
            106,656Class
                A Convertible Preferred Stock; Par Value $.01 per share
            
            
            5,100
            
            
            
            5,100Authorized,
                issued and outstanding 5,100,000 sharesClass
                B Convertible Preferred Stock; Par Value $.01 per share
            
            
            5,100
            
            
            
            5,100Authorized,
                issued and outstanding 5,100,000 sharesSubscription
                Receivable
            
            
            (758,072
            )
            
            
            (258,072
            )Capital
                in Excess of Par Value
            
            
            14,077,048
            
            
            
            13,119,002Deficit
                Accumulated During the Development Stage
            
            
            (14,749,231
            )
            
            
            (14,173,211
            )Total
                Stockholders' Deficit
            
            
            (1,278,900
            )
            
            
            (1,195,425
            )Total
                Liabilities and Stockholders' Deficit
            
            $
            276,626
            
            
            $
            620,001The
                accompanying notes are an integal part of theses financial
                statements.





4





**Camelot
                Entertainment Group, Inc.**Statements
                of OperationsUnauditedFromInception
                onApril
                21, 1999For
                Three Months ended,
            
            
            For
                the Nine months ended
            
            
            throughSeptember
                30,
            
            
            September
                  30,
            
            
            September
                  30,
            
            
            September
                  30,
            
            
            September
                30,2007
            
            
            2006
            
            
            2007
            
            
            2006
            
            
            2007REVENUE
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            58,568Total
                Revenue
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            58,568EXPENSESCosts
                of services
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            95,700Sales
                and marketing
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            53,959Research
                & development
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            252,550General
                & administrative
            
            
            238,758
            
            
            
            198,022
            
            
            
            1,177,537
            
            
            
            591,743
            
            
            
            11,324,973Impairment
                of assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,402,338Impairment
                of investments inother
                companies
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            710,868Total
                Expenses
            
            
            238,758
            
            
            
            198,022
            
            
            
            1,177,537
            
            
            
            591,743
            
            
            
            14,840,388NET
                OPERATING LOSS
            
            
            (238,758
            )
            
            
            (198,022
            )
            
            
            (1,177,537
            )
            
            
            (591,743
            )
            
            
            (14,781,820
            )OTHER
                INCOME (EXPENSES)Interest
                (Expense)
            
            
            (121,979
            )
            
            
            -
            
            
            
            (585,935
            )
            
            
            -
            
            
            
            (773,045
            )Loss
                on derivative liabilities
            
            
            -
            
            
            
            -
            
            
            
            (436,645
            )
            
            
            -
            
            
            
            (1,103,406
            )Gain
                on derivative liabilities
            
            
            785,182
            
            
            
            -
            
            
            
            1,624,097
            
            
            
            -
            
            
            
            1,653,577Gain
                on extinguishment of debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            255,500Total
                Other Income (Expenses)
            
            
            663,203
            
            
            
            -
            
            
            
            601,517
            
            
            
            -
            
            
            
            32,626NET
                INCOME (LOSS)
            
            $
            424,445
            
            
            $
            (198,022
            )
            
            $
            (576,020
            )
            
            $
            (591,743
            )
            
            $
            (14,749,231
            )BASIC
                LOSS PER COMMON SHARE
            
            $
            0.0035
            
            
            $
            (0.0021
            )
            
            $
            (0.0047
            )
            
            $
            (0.0016
            )
            
            $
            (0.24
            )WEIGHTED
                AVERAGE NUMBER OFSHARES
                OUTSTANDING
            
            
            122,541,576
            
            
            
            93,649,589
            
            
            
            122,958,243
            
            
            
            93,649,589
            
            
            
            60,868,928The
                accompanying notes are an integral part of these financial
                statements.






5


**Camelot
                Entertainment Group, Inc.****STATEMENTS
                OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)****FROM
                JANUARY 1, 2004 TO SEPTEMBER 30, 2007**(Deficit)AccumulatedCommon
                Stock
            
            
            Preferred
                Stock
            
            
            Additional
            
            
            DuringPaid-In
            
            
            Development
            
            
            Subscription
            
            
            DeferredShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Capital
            
            
            Stage
            
            
            Receivable
            
            
            Compensation
            
            
            Total**Balance
                at January 1, 2004**
            
            
            33,856,433
            
            
            
            33,857
            
            
            
            0
            
            
            
            0
            
            
            
            5,464,539
            
            
            
            (6,059,442
            )
            
            
            0
            
            
            
            0
            
            
            
            (561,046
            )Shares
                issued for services
            
            
            100,000
            
            
            
            100
            
            
            
            
            
            
            
            
            
            
            
            2,900
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,000Shares
                issued for financing
            
            
            6,791,287
            
            
            
            6,791
            
            
            
            
            
            
            
            
            
            
            
            196,948
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            203,739Subscriptions
                receivable for financing agreement
            
            
            0
            
            
            
            0
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (116,069
            )
            
            
            
            
            
            
            (116,069
            )Net
                (loss) for the three months ended March 31, 2004
            
            
            0
            
            
            
            0
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (103,552
            )
            
            
            
            
            
            
            
            
            
            
            (103,552
            )**Balance
                at March 31, 2004**
            
            
            40,747,720
            
            
            $
            40,748
            
            
            $
            0
            
            
            $
            0
            
            
            $
            5,664,387
            
            
            
            (6,191,123.00
            )
            
            $
            (116,069
            )
            
            $
            0
            
            
            $
            (573,928
            )Share
                issued for services
            
            
            24,009,000
            
            
            
            24,009
            
            
            
            
            
            
            
            
            
            
            
            1,085,500
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,109,509Share
                issued for financing
            
            
            7,604,562
            
            
            
            7,605
            
            
            
            0
            
            
            
            0
            
            
            
            221,460
            
            
            
            
            
            
            
            (316,003
            )
            
            
            
            
            
            
            (86,938
            )Advances
                offset sub a/r
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            174,000
            
            
            
            
            
            
            
            174,000Shares
                issued for debt
            
            
            1,000,000
            
            
            
            1,000
            
            
            
            0
            
            
            
            0
            
            
            
            39,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            40,000Shares
                issued for amt due
            
            
            1,589,927
            
            
            
            1,590
            
            
            
            0
            
            
            
            0
            
            
            
            47,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            48,590Value
                of option exercised
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            351,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            351,000Net
                (loss)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,161,756
            )
            
            
            
            
            
            
            
            
            
            
            (1,161,756
            )**Balance
                as of December 31, 2004**
            
            
            74,951,209
            
            
            
            74,952
            
            
            
            -
            
            
            
            -
            
            
            
            7,408,347
            
            
            
            (7,324,719
            )
            
            
            (258,072
            )
            
            
            
            
            
            
            (99,492
            )Net
                (loss) 1st quarter
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (117,096
            )
            
            
            
            
            
            
            
            
            
            
            (117,096
            )**Balance
                at March 31, 2005**
            
            ****
            **74,951,209**
            
            
            ****
            **74,952**
            
            
            **$**
            **0**
            
            
            **$**
            **0**
            
            
            ****
            **7,408,347**
            
            
            ****
            **(7,441,815**
            **)**
            
            ****
            **(258,072**
            **)**
            
            **$**
            **0**
            
            
            ****
            **(216,588**
            **)**Shares
                issued for
            
            
            4,000,000
            
            
            
            4,000
            
            
            
            0
            
            
            
            0
            
            
            
            216,000
            
            
            
            0
            
            
            
            
            
            
            
            
            
            
            
            220,000consulting
                servicesShares
                issued for
            
            
            2,276,033
            
            
            
            2,276
            
            
            
            0
            
            
            
            0
            
            
            
            187,568
            
            
            
            0
            
            
            
            
            
            
            
            
            
            
            
            189,844officers
                salariesShares
                issued to
            
            
            1,848,723
            
            
            
            1,849
            
            
            
            0
            
            
            
            0
            
            
            
            79,078
            
            
            
            0
            
            
            
            
            
            
            
            
            
            
            
            80,927Eagle
                for expenses paidNet
                Loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (486,174
            )
            
            
            
            
            
            
            
            
            
            
            (486,174
            )Subtotals
                for 2nd quarter
            
            
            8,124,756
            
            
            
            8,125
            
            
            
            0
            
            
            
            0
            
            
            
            482,646
            
            
            
            (486,174
            )
            
            
            
            
            
            
            
            
            
            
            4,597**Balance
                at June 30, 2005**
            
            ****
            **83,075,965**
            
            
            ****
            **83,076**
            
            
            ****
            **0**
            
            
            ****
            **0**
            
            
            ****
            **7,890,993**
            
            
            ****
            **(7,927,989**
            **)**
            
            ****
            **(258,072**
            **)**
            
            
            
            
            
            ****
            **(211,993**
            **)**Net
                Loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (127,024
            )
            
            
            
            
            
            
            
            
            
            $
            (127,024
            )**Balance
                at Sept 30, 2005**
            
            
            83,075,965
            
            
            
            83,076
            
            
            
            0
            
            
            
            0
            
            
            
            7,890,993
            
            
            $
            (8,055,014
            )
            
            $
            (258,072
            )
            
            
            
            
            
            
            (339,017
            )Shares
                issued for
            
            
            233,547
            
            
            
            233
            
            
            
            0
            
            
            
            0
            
            
            
            9,767
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,000consulting
                servicesShares
                issued for
            
            
            3,538,263
            
            
            
            3,538
            
            
            
            0
            
            
            
            0
            
            
            
            171,462
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            175,000officers
                salariesShares
                issued to
            
            
            1,452,662
            
            
            
            1,453
            
            
            
            0
            
            
            
            0
            
            
            
            118,219
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            119,672Eagle
                for expenses paidShares
                issued to Eagle
            
            
            1,762,271
            
            
            
            1,762
            
            
            
            
            
            
            
            
            
            
            
            120,991
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            122,75320%
                of shares issuedShares
                issued for
            
            
            3,586,881
            
            
            
            3,587
            
            
            
            
            
            
            
            
            
            
            
            256,354
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            259,941Shareholder
                loans 2005Net
                Loss 4th Quarter
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (3,769,845
            )
            
            
            
            
            
            
            
            
            
            
            (3,769,845
            )Class
                A Preferred Stock issued
            
            
            
            
            
            
            
            
            
            
            5,100,000
            
            
            
            5,100
            
            
            
            555,900
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            561,000Class
                B Preferred Stock issued
            
            
            
            
            
            
            
            
            
            
            5,100,000
            
            
            
            5,100
            
            
            
            2,799,900
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,805,000






6




**STATEMENTS
        OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) -
        continued**


**Balance
                  at Dec 31, 2005**
              
              ****
              **93,649,589**
              
              
              ****
              **93,649**
              
              
              ****
              **10,200,000**
              
              
              ****
              **10,200**
              
              
              ****
              **11,923,586**
              
              
              ****
              **(11,824,859**
              **)**
              
              ****
              **(258,072**
              )
              
              
              
              
              
              
              (55,496
              )Net
                  Loss at December 31, 2006
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,348,352
              )Shares
                  issued for
              
              
              5,191,538
              
              
              
              5,192
              
              
              
              0
              
              
              
              0
              
              
              
              464,808
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              470,000officers
                  salariesShares
                  issued to Consultants
              
              
              2,009,787
              
              
              
              2,010
              
              
              
              
              
              
              
              
              
              
              
              179,078
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              181,088Shares
                  issued to Eaglefor
                  expenses paid
              
              
              1,201,329
              
              
              
              1,201
              
              
              
              0
              
              
              
              0
              
              
              
              113,120
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              114,321Shares
                  issued to Eagle
              
              
              1,270,772
              
              
              
              1,271
              
              
              
              0
              
              
              
              0
              
              
              
              116,911
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              118,182Shareholder
                  loansShares
                  issued to Eagle
              
              
              1,832,728
              
              
              
              1,833
              
              
              
              0
              
              
              
              0
              
              
              
              168,611
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              170,444per
                  agreement 20%Shares
                  issued to
              
              
              1,500,000
              
              
              
              1,500
              
              
              
              0
              
              
              
              0
              
              
              
              133,650
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              135,150Scorpion
                  Bay LLC
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              19,238
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              19,238**Balance
                  at Dec 31, 2006**
              
              ****
              **106,655,743**
              
              
              ****
              **106,656**
              
              
              ****
              **10,200,000**
              
              
              ****
              **10,200**
              
              
              ****
              **13,119,002**
              
              
              ****
              **(14,173,211**
              **)**
              
              ****
              **(258,072**
              )
              
              
              
              
              
              
              (1,195,425
              )****Shares
                  issued to Nucore
              
              
              5,000,000
              
              
              
              5,000
              
              
              
              
              
              
              
              
              
              
              
              495,000
              
              
              
              
              
              
              
              (500,000
              )
              
              
              
              
              
              
              -Shares
                  issued for interest on Note Payable
              
              
              11,800,000
              
              
              
              11,800
              
              
              
              
              
              
              
              
              
              
              
              345,600
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              357,400Shares
                  issued for expenses paid
              
              
              401,957
              
              
              
              401
              
              
              
              
              
              
              
              
              
              
              
              15,676
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              16,077Shares
                  issued for services
              
              
              6,187,267
              
              
              
              6,187
              
              
              
              
              
              
              
              
              
              
              
              63,867
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              70,054Shares
                  issued for conversion of notes payable
              
              
              10,750,750
              
              
              
              10,751
              
              
              
              
              
              
              
              
              
              
              
              40,162
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              50,913Accelerated
                  amortization of discount on notes
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (40,011
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (40,011
              )payable
                  - NIRDerivatives
                  liability relieved by conversions on N/P
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              35,204
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              35,204Imputed
                  interest on Shareholders loans
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,908
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,908Net
                  (Loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (576,020
              )
              
              
              
              
              
              
              
              
              
              
              (576,020
              )**Balance
                  at September 30, 2007**
              
              ****
              **140,795,717**
              
              
              **$**
              **140,795**
              
              
              ****
              **10,200,000**
              
              
              **$**
              **10,200**
              
              
              **$**
              **14,077,408**
              
              
              **$**
              **(14,749,231**
              **)**
              
              **$**
              **(758,072**
              **)**
              
              ****
              **-**
              
              
              **$**
              **(1,278,900**
              **)**The
                  accompanying notes are an integral part of these financial
                  statements.




7


**Camelot
                Entertainment Group, Inc.**Statements
                of Cash FlowsFromInception
                onApril
                21, 1999For
                nine month ended
            
            
            throughSeptember
                30,
            
            
            September
                30,
            
            
            September
                30,2007
            
            
            2006
            
            
            2007OPERATING
                ACTIVITIESNet
                loss for the period
            
            $
            (576,020
            )
            
            $
            (591,740
            )
            
            $
            (14,749,231
            )Adjustments
                to reconcile net loss to cash used by operating
                activities:Amortization
                of deferred financing cost
            
            
            25,338
            
            
            
            
            
            
            
            25,594Amortization
                of discount associated with Note Payable
            
            
            201,949
            
            
            
            
            
            
            
            203,470Imputed
                Interest on Note Payable
            
            
            2,908
            
            
            
            
            
            
            
            22,146Gain
                on Derivative Liability-warrant
            
            
            (1,624,097
            )
            
            
            
            
            
            
            (1,653,527
            )Common
                stock issued for interest expense
            
            
            300,000
            
            
            
            -
            
            
            
            435,150Common
                stock issued per dilution agreement
            
            
            -
            
            
            
            -
            
            
            
            368,508Value
                of options expensed
            
            
            -
            
            
            
            -
            
            
            
            351,000Gain
                on extinguishment of debt
            
            
            -
            
            
            
            -
            
            
            
            (255,500
            )Depreciation
            
            
            
            
            
            
            
            
            
            
            3,997Amortization
                of deferred compensation
            
            
            -
            
            
            
            -
            
            
            
            1,538,927Common
                Stock issued for services
            
            
            70,054
            
            
            
            -
            
            
            
            2,603,989Loss
                on Derivative Liability
            
            
            436,645
            
            
            
            -
            
            
            
            1,103,406Common
                Stock issued for expense reimbursement
            
            
            -
            
            
            
            
            
            
            
            22,000Common
                Stock issued for technology
            
            
            
            
            
            
            
            
            
            
            19,167Impairment
                of investments in other companies
            
            
            -
            
            
            
            
            
            
            
            710,868Impairment
                of assets
            
            
            
            
            
            
            
            
            
            
            2,628,360Prepaid
                services expensed
            
            
            -
            
            
            
            2,392
            
            
            
            530,000Expenses
                paid through notes payable proceeds
            
            
            -
            
            
            
            -
            
            
            
            66,489Loss
                on disposal of property and equipment
            
            
            
            
            
            
            
            
            
            
            5,854Preferred
                Stock issued to shareholder
            
            
            -
            
            
            
            -
            
            
            
            3,366,000Change
                in assets and liabilities:(increase)
                decrease in other current assets
            
            
            -
            
            
            
            (11,195
            )
            
            
            (24,358
            )Increase
                (decrease) in accounts payable & other a/p
            
            
            523,872
            
            
            
            290,914
            
            
            
            871,638Increase
                (decrease) in due to officers
            
            
            -Net
                Cash used for operating activities
            
            $
            (639,351
            )
            
            $
            (309,629
            )
            
            $
            (1,806,103
            )Cash
                flows from investing activities:Purchase
                of fixed assets
            
            
            
            
            
            
            
            
            
            
            (6,689
            )Purchase
                of assets-Script Costs/business deposits
            
            
            (103,900
            )
            
            
            (94,500
            )
            
            
            (189,700
            )Cash
                used for investing activities
            
            $
            (103,900
            )
            
            $
            (94,500
            )
            
            $
            (196,389
            )Cash
                flows from financing activities:Contributed
                capital
            
            
            -
            
            
            
            -
            
            
            
            25,500Borrowing
                from affiliate / shareholder
            
            
            156,565
            
            
            
            401,982
            
            
            
            1,173,178Borrowing
                on Debt
            
            
            709,800
            
            
            
            
            
            
            
            1,584,800Advances
                to affiliate / shareholders loans
            
            
            (295,051
            )
            
            
            -
            
            
            
            560,947Financing
                costs
            
            
            (13,000
            )
            
            
            
            
            
            
            (88,000
            )Principal
                payment short term note
            
            
            (250,000
            )
            
            
            -
            
            
            
            (254,477
            )Cash
                provided by financing activities
            
            $
            308,314
            
            
            $
            401,982
            
            
            $
            2,001,948Decrease
                in cash
            
            $
            (434,937
            )
            
            
            (2,147
            )
            
            
            (544
            )Cash
                at beginning of period
            
            $
            435,533
            
            
            $
            3,023
            
            
            $
            1,140Cash
                at the end of the period
            
            $
            596
            
            
            $
            876
            
            
            $
            596Supplemental
              Schedule ofNon
                - Cash TransactionsStock
                issued for related party debt
            
            
            16,077
            
            
            
            
            
            
            
            614,077Creation
                of additional debt discount
            
            
            320,315
            
            
            
            
            
            
            
            552,818Accelerated
                amortization of disount on N/P
            
            
            40,011
            
            
            
            
            
            
            
            40,011Stock
                issued for debt conversion
            
            
            50,912
            
            
            
            
            
            
            
            50,912Stock
                issued per financing agreement
            
            
            500,000
            
            
            
            
            
            
            
            500,000Derivative
                liability relieved by conversion
            
            
            35,204
            
            
            
            
            
            
            
            35,204The
                accompanying notes are an integral part of these financial
                statements.





8
 
 **CAMELOT
          ENTERTAINMENT GROUP, INC.**
 **NOTES
          TO FINANCIAL STATEMENTS** **FOR
          THE NINE MONTHS ENDED, SEPTEMBER 30, 2007**





**1.
      BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**





Organization:





Camelot
      Entertainment Group, Inc, a Delaware Corporation (the “Company”), is in the
      business of developing, producing, marketing and distributing motion pictures,
      television productions and digital media content. It has three main divisions:
      Camelot Film Group, Camelot Studio Group and Camelot Production Services Group
      (collectively “Camelot”). From inception until 2004 when the predecessor entity
      acquired Camelot Films® and changed its name to Camelot Entertainment Group,
      Inc.,, its activities consisted of raising capital, recruiting a management
      team
      and entering into ventures and alliances with affiliates. As of December 31,
      2002 the Company had written-off all of its investments due to impairments
      in
      the carrying value of the assets. Since 2004, the Company’s activities have
      consisted of developing and implementing its business plan, raising capital,
      recruiting a management team and entering into several transactions as part
      of
      its long term plans in the motion picture, television and digital media
      industry.





Basis
      of Presentation:





Management
      has determined that the Company is considered to be a development stage
      enterprise as defined in Statement of Financial Accounting Standards No. 7,
      “Accounting and Reporting by Development Stage Enterprises.” Consequently,
      Camelot has presented these financial statements in accordance with that
      Statement, including losses incurred from April 21, 1999 (Inception) to
      September 30, 2007.





The
      accompanying unaudited financial statements as of September 30, 2007 and for
      the
      Nine months ended September 30, 2007 and 2006, respectively, have been prepared
      in accordance with generally accepted accounting principles for interim
      financial information. Accordingly, they do not include all of the information
      and footnotes required by generally accepted accounting principles for audited
      financial statements. In the opinion of Camelot’s management, the interim
      information includes all adjustments, consisting only of normal recurring
      adjustments, necessary for a fair presentation of the results for the interim
      periods. The footnote disclosures related to the interim financial information
      included herein are also unaudited. Such financial information should be read
      in
      conjunction with the consolidated financial statements and related notes thereto
      as of December 31, 2006 and for the year then ended included in Camelot’s annual
      report on Form 10-KSB/A, amended as of May 11,2007.




















9
 
 **CAMELOT
        ENTERTAINMENT GROUP, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS** **FOR
        THE THREE MONTHS ENDED, MARCH 31, 2007**





**2. 
      GOING CONCERN**





The
      accompanying financial statements have been prepared assuming that Camelot
      will
      continue as a going concern. Camelot has had minimal revenues, has experienced
      an accumulated deficit of $14,749,231 and has a stockholders’ deficit. These
      conditions, the loss of financial support from affiliates, and the failure
      to
      secure a successful source of additional financial resources in the future
      could
      raise doubt about the Company’s ability to continue as a going concern as the
      Company’s business plan has a long term sales cycle. The financial statements do
      not include any adjustments to reflect the possible future effects on the
      classification of liabilities that may result from the outcome of this
      uncertainty.





Management
      has secured financial commitments that will allow it to operate through the
      end
      of fiscal year 2008 and beyond. Management’s plans with respect to any future
      negative fiscal situation consist of seeking additional financial resources
      from
      its existing investors, new investors, private placement and/or secondary
      offering financing. In fiscal year 2006 and 2007, the Company completed and
      subscribed several interim financings, including a fully subscribed SB2
      registration. However, instability in the stock price may make it difficult
      to
      find parties willing to accept restricted shares of common stock in the future
      in connection with any additional private placements and/or registrations.
      There
      is no assurance that such fiscal tools would be made available to Camelot,
      or
      that they would be on financially viable terms.




**3. 
      COMMITMENTS AND CONTINGENCIES**




During
      the nine month period ended September 30, 2007, the Camelot recorded $31,437
      in
      advances by an affiliate on behalf of Camelot, compared to $401,982 for nine
      month period ended September 30, 2006. The affiliate has not received any shares
      of common stock for repayment of expense advances on behalf of
      Camelot.




**4.****NOTES
      PAYABLE**





On
      December 27, 2006, Camelot issued a callable secured convertible note payable
      for $600,000 and $400,000 on June 6, 2007 to various holders.  The
      note payable provided for annual interest at 8%, was secured by all of the
      assets of the Company with the exception of Camelot Film Group and Camelot
      Studio Group, which were excluded from the security agreements issued in
      connection with the above referenced funding. The notes will mature on April
      27,
      2009. The principle and accrued interest of the note is convertible into
      Camelot’s common stock at a variable conversion price, which is 50% of the
      average market price of the common stock of the lowest three trading days prior
      to the date of conversion. In addition, these notes have registration rights
      agreements, which call for liquidated damages in the event an effective
      registration statement is not filed within a timely basis. However, the Company
      did file its registration statement in a timely manner and has issued stock
      from
      time to time in connection therewith.  In addition, the holders of
      these notes were issued 7-year warrants to purchase 10,582,609 common shares
      at
      an exercise price of $0.15 per share.





Of
      the
      proceeds of $600,000, Camelot recognized $75,000 in deferred financing costs
      related to cost of securing the debt. Of the proceeds of $400,000, Camelot
      recognized $13,000 in deferred financing costs related to cost of securing
      the
      debt. The deferred financing cost will be amortized over the life of the notes
      payable. $7,326 and $256 of the deferred financing cost was amortized as of
      September 30, 2007 and December 31, 2006, respectively, and included in interest
      expense.





Camelot
      evaluated the convertible notes and warrants under Statement of Financial
      Accounting Standards No. 133, “Accounting for Derivative Instruments” and
      Emerging Issues Task Force 00-19 and determined that the Convertible notes
      contained compound embedded derivative liabilities. The warrants were also
      determined to be liabilities under SFAS 133 and EITF 00-19. Camelot determined
      that the compound embedded conversion features required bi furcating from the
      note instrument and required an estimate of its fair market value. Camelot
      hired
      an independent valuation expert to determine the fair market value of both
      the
      compound embedded derivative and the warrants. The fair market value of the
      compound embedded derivative was estimated using a lattice model incorporating
      weighted average probability cash flow. The fair market value of the warrants
      was estimated using Black Scholes with the major assumptions of (1) calculated
      volatility of 150%; (2) expected term of 7 years; (3) risk free rate of 4.64%
      and (4) expected dividends of zero.















10
 
 **CAMELOT
        ENTERTAINMENT GROUP, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS** **FOR
        THE THREE MONTHS ENDED, MARCH 31, 2007**







**4. 
      NOTESPAYABLE 
-
      continued**






At
      September 30, 2007, Camelot estimated the fair value of the derivative
      liabilities to be a total of $334,939 resulting in a net gain on derivative
      liability presented in the statement of operations of $1,187,451. In addition,
      Camelot amortized $169,605 of the discount on the note payable and this amount
      is included in interest expense.





In
      November 2006, Camelot issued note payable to Scorpion Bay LLC for $250,000,
      which matured on March 22, 2007. This note was recorded at its full face value
      at December 31, 2006. In connection with this note, Camelot issued 1,500,000
      shares of common stock. As this note has matured, this total amount was
      considered to be interest expense.  Camelot issued 2,000,000 shares of
      common stock and 2,500,000 shares of common stock for default provisions of this
      note.  The company recorded issuance of these shares at fair market
      value as interest expense as of June 30, 2007.   This note was
      paid on June 7, 2007. The note had been guaranteed by Robert Atwell, the
      Company’s President and CEO. In addition, Mr. Atwell provided additional
      collateral.





In
      June
      2007, Camelot issued a note payable to Scorpion Bay LLC for $300,000, which
      matured on November 15, 2007.  The proceeds from this note were
      received in three consecutive payments of $100,000 beginning on June 15, 2007
      and ending August 15, 2007.  Camelot issued 1,000,000 of common stock
      for each $100,000 received between June 15, 2007 and August 15, 2007. 
From June 2007 to September 30, 2007, Camelot issued an additional 8,800,000
      shares for interest.  The total fair market value of the shares issued to
      Scorpion Bay totaled $357,400.  As this note matures, this total amount was
      considered to be interest expense and the shares were recorded at fair market
      value. This note has been guaranteed by Robert Atwell, the Company’s President
      and CEO. In addition, Mr. Atwell has provided additional
      collateral.





**5.********DUE
      TO
      OFFICERS******





In
      the
      nine month period ended September 30, 2007 Camelot had accrued $342,500 in
      compensation to its officers.




**6. 
      RELATED PARTY TRANSACTIONS**




During
      the nine month periods ending September 30, 2007 and 2006, Camelot entered
      into
      related party transactions with Board members, officers and affiliated entities
      owned by the CEO of the Company. Camelot plans to issue shares of common stock
      for services rendered, cash advances, and payment of expenses on Camelot’s
      behalf. Camelot also plans to reach a settlement with one or more board members,
      officers and affiliated entities owned by the CEO of the Company during the
      fourth quarter for services rendered, cash advances, licenses, contractual
      obligations and payment of expenses on Camelot’s behalf.




As
      a result of our agreement with the affiliated
      company owned by the CEO of Camelot, the affiliate receives 20% of the Company’s
      common stock on an anti-dilutive basis in return for services and cash
      advances. The anti-dilutive provisions are in force through March 28, 2008.
      In
      addition, the affiliate has the option to receive 2,000,000 cashless options
      to
      purchase common shares at $0.03 per share. For each one dollar ($1) increase
      in
      the price of the Company’s stock, the affiliate shall be entitled to receive an
      additional two million options throughout the term of the agreement between
      the
      affiliate and the Company, which expires on March 28, 2008. In addition, the
      Company shall have the first right of refusal to purchase the options from
      the
      affiliate for the current market value once the affiliate notifies the Company
      that it intends to exercise the options. In the event the Company elects not
      to
      exercise this first right of refusal, and subject to applicable laws, the
      affiliate shall be entitled to exercise the sale of shares or options
      immediately thereafter. As of September 30, 2007, the affiliate has not
      exercised its right to receive the options and therefore no options have been
      granted. The affiliate’s right to receive the options and to exercise those
      options expires on March 28, 2008. No shares were issued during the quarter
      for
      this agreement.




**7.
       COMMON STOCK**





Camelot
      issued 5,000,000 to Nucore Industries, Inc. on March 16, 2007, as a good faith
      non-refundable deposit for a potential financing to be funded by Nucore, and
      it
      has been presented as a subscription receivable at September 30,
      2007.





During
      the nine months ended September 30, 2007, Camelot issued 10,750,750 shares
      for
      conversion of the notes payable totalling $50,913.




During
      the nine months ended September 30, 2007,
      Camelot issued 6,187,267 shares for services.  These shares were valued on
      the date of issuance at the closing market price.









11


**ITEM
      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**







The
      matters discussed in this report contain forward-looking statements within
      the
      meaning of Section 27A of the Securities Act of 1933, as amended, and within
      the
      meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
      which
      are subject to the "safe harbor" created by those sections. These
      forward-looking statements include but are not limited to statements concerning
      our business outlook or future economic performance; anticipated profitability,
      revenues, expenses or other financial items; and statements concerning
      assumptions made or exceptions as to any future events, conditions, performance
      or other matters which are "forward-looking statements" as that term is defined
      under the Federal Securities Laws. All statements, other than historical
      financial information, may be deemed to be forward-looking statements. The
      words
      "believes", "plans", "anticipates", "expects", and similar expressions herein
      are intended to identify forward-looking statements. Forward-looking statements
      are subject to risks, uncertainties, and other factors, which would cause actual
      results to differ materially from those stated in such statements.
      Forward-looking statements include, but are not limited to, those discussed
      in
      "Factors That May Affect Future Results," and elsewhere in this report, and
      the
      risks discussed in the Company's other SEC filings.





**Critical
      Accounting Estimates**





The
      preparation of our financial statements in conformity with accounting principles
      generally accepted in the United States of America requires our management
      to
      make certain estimates and assumptions that affect the reported amounts of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. As such, in accordance with the use of
      accounting principles generally accepted in the United States of America, our
      actual realized results may differ from management’s initial estimates as
      reported. A summary of our significant accounting policies is detailed in the
      notes to the financial statements, which are an integral component of this
      filing.




Management
      evaluates the probability of the utilization of the deferred income tax asset
      related to the net operating loss carry forwards. The Company has estimated
      a
      $2,450,000 deferred income tax asset related to net operating loss carry
      forwards and other book/tax differences at September 30, 2007 to $5,510,000.
      Management determined that because the Company has yet to generate taxable
      income, and that the generation of taxable income in the short term is
      uncertain, it was appropriate to provide a valuation allowance for the total
      deferred income tax asset.




We
      had
      acquired certain technology and licenses. Prior to January 1, 2004, the Company
      determined that the value of these acquired assets was impaired and has provided
      an impairment allowance for the full purchase price of these assets. The
      impairment amount charged to operations in prior years was
      $2,402,338.





**Critical
      Accounting Policies**





We
      have
      defined a critical accounting policy as one that is both important to the
      portrayal of our financial condition and results of operations, and requires
      the
      management to make difficult, subjective or complex judgments. Estimates and
      assumptions about future events and their effects cannot be perceived with
      certainty. The Company bases its estimates on historical experience and on
      various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments. These
      estimates may change as new events occur, as more experience is acquired, as
      additional information is obtained and as the Company's operating environment
      changes.





We
      have
      identified the policies below as critical to our business operations and the
      understanding of our results of operations. The impact and any associated risks
      related to these policies on our business operations is discussed throughout
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations, where such policies affect our reported and expected financial
      results. In the ordinary course of business, we have made a number of estimates
      and assumptions relating to the reporting of results of operations and financial
      condition in the preparation of our financial statements in conformity with
      accounting principles generally accepted in the United States of America. Actual
      results could differ significantly from those estimates under different
      assumptions and conditions. We believe that the following discussion addresses
      our most critical accounting policies, which are those that are most important
      to the portrayal of our financial condition and results of operations and
      require our most difficult, subjective, and complex judgments, often as a result
      of the need to make estimates about the effect of matters that are inherently
      uncertain.













12


**ITEM
      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION** -
      continued







**Accounting
      for Motion Picture Costs**





In
      accordance with accounting principles generally accepted in the United States
      and industry practice, we amortize the costs of production, including
      capitalized interest and overhead, as well as participations and talent
      residuals, for feature films using the individual-film-forecast method under
      which such costs are amortized for each film in the ratio that revenue earned
      in
      the current period for such title bears to management’s estimate of the total
      revenues to be realized from all media and markets for such title. All
      exploitation costs, including advertising and marketing costs are expensed
      as
      incurred. Theatrical print costs are amortized over the periods of theatrical
      release of the respective territories.




Management
      plans to regularly review, and revise when necessary, our total revenue
      estimates on a title-by-title basis, which may result in a change in the rate
      of
      amortization and/or a write-down of the film asset to estimated fair value.
      These revisions can result in significant quarter-to-quarter and year-to-year
      fluctuations in film write-downs and amortization. A typical film recognizes
      a
      substantial portion of its ultimate revenues within the first two years of
      release. By then, a film has been exploited in the domestic and international
      theatrical markets and the domestic and international home video markets, as
      well as the domestic and international pay television and pay-per-view markets.
      A similar portion of the film’s capitalized costs should be expected to be
      amortized accordingly, assuming the film or television program is
      profitable.




The
      commercial potential of individual motion pictures varies dramatically, and
      is
      not directly correlated with production or acquisition costs. Therefore, it
      is
      difficult to predict or project a trend of our income or loss. However, the
      likelihood that we would report losses, particularly in the year of a motion
      picture’s release, is increased by the industry’s method of accounting, which
      requires the immediate recognition of the entire loss (through increased
      amortization) in instances where it is estimated the ultimate revenues of a
      motion picture could not recover our capitalized costs. On the other hand,
      the
      profit of a profitable motion picture must be deferred and recognized over
      the
      entire revenue stream generated by that motion picture. This method of
      accounting may also result in significant fluctuations in reported income or
      loss, particularly on a quarterly basis, depending on our release schedule,
      the
      timing of advertising campaigns and the relative performance of individual
      motion pictures.





**Accounting
      for Films**





In
      June
      2000, the Accounting Standards Executive Committee of the American Institute
      of
      Certified Public Accountants issued Statement of Position 00-2 “Accounting by
      Producers or Distributors of Films” (“SoP 00-2”). SoP 00-2 establishes new
      accounting standards for producers or distributors of films, including changes
      in revenue recognition, capitalization and amortization of costs of acquiring
      films and accounting for exploitation costs, including advertising and marketing
      expenses. We elected adoption of SoP 00-2 effective as of April 1,
      2004.





The
      principal changes as a result of applying SOP 00-2 are as follows:





Advertising
      and marketing costs, which were previously capitalized to investment in films
      on
      the balance sheet and amortized using the individual film forecast method,
      are
      now expensed the first time the advertising takes place.













13


**ITEM
      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION** -
      continued






We
      capitalize costs of production, including financing costs, to investment in
      motion pictures. These costs are amortized to direct operating expenses in
      accordance with SoP 00-2. These costs are stated at the lower of unamortized
      motion picture costs or fair value (net present value). These costs for an
      individual motion picture or television program are amortized in the proportion
      that current period actual revenues bear to management’s estimates of the total
      revenue expected to be received from such motion picture over a period not
      to
      exceed ten years from the date of delivery.





Management
      plans to regularly review, and revise when necessary, its total revenue
      estimates, which may result in a change in the rate of amortization and/or
      write-down of all or a portion of the unamortized costs of the motion picture
      to
      its fair value. No assurance can be given that unfavorable changes to revenue
      estimates will not occur, which may result in significant write-downs affecting
      our results of operations and financial condition.





**Capital
      Structure**




The
      Company has adopted Statement of Financial Accounting Standards No. 129,
      "Disclosure of Information about Capital Structure" ("SFAS 129"), which requires
      companies to disclose all relevant information regarding their capital
      structure. The Company reached an agreement with Eagle Consulting Group, Inc.
      on
      March 28, 2003 to provide operational funding for the Company. In exchange
      for
      twenty percent (20%)of the Company’s outstanding common stock on an
      anti-dilutive, continuing basis until the Company could secure additional
      financing from another source, Eagle agreed to provide funding for the Company’s
      annual audit, quarterly filings, accounts payable and other ongoing expenses
      including office, phones, business development, legal and accounting fees.
      Eagle
      advances from January 1, 2007 to September 30 total $31,437. In accordance
      with
      the anti-dilutive provision, the amount of stock due Eagle is calculated on
      a
      quarterly basis. This anti-dilution provision to the agreement could have a
      material adverse effect on our shareholders as it might continue for a
      substantial period of time and as a result the dilutive effect to the
      shareholders cannot be fully determined until the funding from Eagle
      ceases.





*Going
      Concern Uncertainties*




The
      accompanying financial statements have been prepared in conformity with
      generally accepted accounting principles, which contemplate continuation of
      the
      Company as a going concern. However, the Company has experienced recurring
      operating losses and negative cash flows from operations in part due to the
      long
      sales cycles associated with its business model.




The
      Company's continued existence is dependent upon its ability to generate
      operating revenues and/or obtain additional debt, equity or other type of
      financing.





The
      Company entered into an agreement with Eagle Consulting Group, Inc., a Nevada
      corporation ("Eagle"), to provide equity financing. That agreement has since
      been transferred to the Atwell Group, LLC (“TAG”). TAG has advanced and/or
      arranged for the Company various amounts of funds during the first, second
      and
      third quarters of 2007, and it appears likely that such funding should be enough
      to meet all of the Company's cash requirements for the remaining quarter in
      2007
      and throughout fiscal year 2008. However, should TAG elect not to fund the
      Company in the future, the Company must find additional sources of financing
      in
      order to remain a going concern until revenues are generated is such an amount
      that will sustain operations for an extended period of time.  In
      addition, the majority of the Company’s fiscal assets have been directed toward
      the project known as “Camelot Studios at ATEP”. To date, the Company has
      incurred total costs of approximately $2,600,000 in connection with Camelot
      Studios at ATEP through its Camelot Studio Group division. There can be no
      assurance that this project will be successful and as a result generate any
      revenues for Camelot Studio Group and/or the Company. The financial statements
      do not include any adjustments that might result from the outcome of this
      uncertainty.





We
      have incurred losses in each operating period since our inception on October
      12,
      1999. Operating losses may continue, which could adversely affect financial
      results from operations and stockholder value, and there is a risk that we
      may
      never become profitable.





As
      of September 30, 2007, we have an accumulated deficit of $14,749,231 the
      majority of which related to our previous activities as a business development
      organization and none of which relate to our current activities as a motion
      picture, television and digital media production, marketing and distribution
      entity. There can be no assurance that our management will be successful in
      managing the Company as a motion picture, television and digital media
      production, distribution and marketing concern.













14


**ITEM
      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION** -
      continued






**Derivative
      Instruments**





In
      June 1998, the Financial Accounting
      Standards Board issued Statement of Financial Accounting Standards No. 133,*“Accounting for
      Derivative Instruments and Hedging Activities,”*as amended by Statement
      of Financial
      Accounting Standards No. 137,*“Accounting for
      Derivative
      Instruments and Hedging Activities - Deferral of the Effective Date of Financial
      Accounting Standards Board No. 133,”*and by Statement
      of Financial
      Accounting Standards No. 138,*“Accounting for
      Certain Derivative
      Instruments and Certain Hedging Activities - an Amendment of Financial
      Accounting Standards Board Statement No. 133,”*which is effective
      for all quarters of
      fiscal years beginning after June 15, 2000. This statement establishes
      accounting and reporting standards for derivative instruments, including certain
      derivative instruments embedded in other contracts, and for hedging activities.
      We adopted Statement of Financial Accounting Standards No. 133 beginning January
      1, 2004. The adoption of Statement of Financial Accounting Standards No. 133
      did
      materially impact our results of operations with our convertible notes payable
      entered into in December 2006.





**Plan
      of Operations**





**Overview**





Our
      predecessor company was incorporated in Delaware on October 12, 1999. Our
      current President and CEO acquired the predecessor company in May 2003, with
      the
      intention to reorganize the predecessor company through the jettison of the
      predecessors’ business model, a process which began in May 2003. During the next
      twelve months, a new management team was brought in, the Company acquired
      Camelot Films® and began to develop and implement its current business model as
      a motion picture, television and digital media development, production and
      distribution company.





During
      May 2004 we changed our name to Camelot Entertainment Group, Inc. and began
      the
      process of updating the “Camelot Studio Model” (or “CSM”), which provides for
      the development, production, marketing and distribution of motion pictures
      in a
      fiscally responsible environment.  During 2004 and into 2005, the
      Company entered into various development agreements and began the process of
      implementing the CSM business plan. At that time, the Company had three
      divisions, Camelot Film Group, which consisted of Camelot Films® and Camelot
      Features; Camelot Studio Group, for future studio development; and Camelot
      Production Services Group, for technology development and production
      consulting.





In
      June
      2005, after returning from the Cannes film festival, management made the
      decision to transition the focus of the Company over to the Studio Group and
      the
      acquisition and/or development of a major studio. It had become apparent that
      with the rapidly approaching digital revolution in the motion picture,
      television and digital media industry, there would be an emerging need for
      modern, state-of-the-art facilities that could produce content in a fiscally
      responsible environment while at the same time building infrastructure through
      education. As a result, the decision was made to switch the emphasis from the
      CSM to Camelot Studio Group, which had for some time been working on various
      potential studio locations domestically and internationally. All projects
      already under development would continue, however the focus was now clearly
      on
      building an operating infrastructure for the Company through the implementation
      of the Camelot Studio Group business model.





In
      September 2005, the Company was contacted about the possibility of building
      a
      major studio with an emphasis on traditional and non-traditional education
      in
      Orange County, California. Shortly thereafter, the Company began the process
      of
      what now has become known as “Camelot Studios at ATEP”, a planned 21st Century,
      state-of-the-art traditional and non-traditional education campus that will
      house the first and only major film, television and digital media studio in
      Orange County California. It is anticipated that more details of the campus
      will
      be made public during the fourth quarter of 2007. As a result of the
      contemplated campus in Orange County, Camelot Studio Group plans to build its
      first studio in Nevada have been put on hold until the Orange County location
      is
      secured.





Even
      though the emphasis is now on the studio group, the development and
      implementation of the CSM is still moving forward. In October 2006, the Company,
      through its Camelot Film Group division, entered into an agreement with an
      established production and distribution company to serve as consultants to
      the
      film group and eventually be acquired at a later date. As part of that
      consulting agreement, the principles will oversee the production activity for
      the film group, including films being developed by Camelot
      Films®.  Negotiations have continued on a more formal agreement during
      2007. The Company anticipates further news on that agreement and the CSM during
      the first quarter of 2008.





The
      CSM
      attempts to combine the efficiencies realized by studios of the early 1900’s,
      with the technology, artistic focus and diversity of today’s independent
      productions. Using this approach, we believe the risk-reward relationship facing
      the typical film project can be dramatically shifted. For example, whereas
      a
      typical film pushes artists and directors to rush development and production
      in
      hopes of conserving cash, the CSM extends the pre-production cycle substantially
      to reduce costs while simultaneously increasing quality. Similarly, whereas
      a
      low-budget picture is severely limited by the types of postproduction technology
      used, due to budget constraints, we intend to invest directly in top of the
      line
      technology, spreading the costs over a targeted minimum of 12 original motion
      pictures each year. The goal of the CSM is to develop the ability to
      consistently produce films with the look, feel and artistic content of
      multi-million dollar pictures, for a fraction of the
      cost.


15




**ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
      OR PLAN
      OF OPERATION** - continued






Through
      our wholly owned subsidiary Camelot Films®, we have a history of operations as a
      film development, production and distribution company dating back to 1978.
      As a
      public company, we have a limited operating history. Our primary focus has
      been
      on the studio project since September 2005, as we consider that critical to
      our
      long term business. Prior to current management acquiring the Company in 2003,
      the predecessors’ business consisted primarily of attempting to provide support,
      organization and restructuring services to other development stage companies.
      We
      believe that due to the complete and drastic change in our business focus,
      period-to-period comparisons of our operating results are not necessarily
      meaningful and should not be relied on as an indication of future performance.
      However, it is still important that you review the audited financial statements,
      the unaudited interim financial statements and the related notes in addition
      to
      thoroughly reading our current plan of operations.





Our
      Financial Statements have been prepared on a going concern basis, which
      contemplates the realization of assets and liabilities and commitments in the
      normal course of business. In the near term, we expect operating costs to
      continue to exceed funds generated from operations. As a result, we expect
      to
      continue to incur operating losses and we may not have sufficient funds to
      grow
      our business in the future. We can give no assurance that we will achieve
      profitability or be capable of sustaining profitable operations. As a result,
      operations in the near future are expected to continue to use working
      capital.





Our
      current cash requirements are provided principally through our financing
      agreement with Eagle Consulting Group, Inc. (“Eagle”), which has since been
      transferred to The Atwell Group (“TAG”). We entered into an agreement with Eagle
      (now TAG) on March 28, 2003, to provide operational funding for the Company.
      In
      exchange for twenty percent (20%)of the Company’s outstanding common stock on a
      non-dilutive, continuing basis until the Company can secure additional financing
      from another source, TAG has agreed to provide funding for the Company’s annual
      audit, quarterly filings, accounts payable and other ongoing expenses including
      office, phones, business development, legal and accounting fees. For the period
      ending September 30, 2007, TAG has advanced the Company a total, including
      interest, of $81,624 which with the financing received in December 2006, covered
      all of our operating expenses for 2007.





To
      successfully grow the individual segments of our business, we must decrease
      our
      cash burn rate, improve our cash position and the revenue base of each segment,
      and succeed in our ability to raise additional capital through a combination
      of
      primarily public or private equity offering or strategic alliances.




As
      more
      fully discussed below, we secured additional financing from 4 investors for
      the
      purpose of funding film development, studio development and operations in
      December 2006. It was our goal to use this funding to have between 10 and 12
      motion pictures in various stages of development within the next 12 months
      and
      to offset costs incurred by the Studio group. To date, we have 14 pictures
      in
      various stages of development, and the studio group projects continue to move
      forward. In addition, during fiscal year 2007 to date, we have secured
      additional funds through bridge loans and other fiscal instruments.





Like
      all
      motion picture production companies, our revenues and results of operations
      could be significantly dependent upon the timing of releases and the commercial
      success of the motion pictures we distribute, none of which can be predicted
      with certainty. Accordingly, our revenues and results of operations may
      fluctuate significantly from period to period, and the results of any one period
      may not be indicative of the results for any future periods. Similarly, the
      efficiencies we aim to realize through our model may not materialize. Failure
      of
      the efficiencies to materialize, along with other risks germane to the picture
      production, may cause us to produce fewer films than our plan calls for. In
      addition, until our studio group activities result in stages actually being
      built and operated, there can be no guarantee that potential revenues from
      those
      operations will ever materialize. Further, because our business model involves
      traditional and non-traditional education elements, the actual profits realized
      from any of our proposed ventures may be capped and/or limited by contract
      provisions, thereby further reducing our ability to produce consistent revenues
      in the future.





**Recent
      Financing**





On
      December 27, 2006, we entered into a Securities Purchase Agreement with AJW
      Capital Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and
      New
      Millennium Capital Partners II, LLC. Under the terms of the Securities Purchase
      Agreement, the Investors purchased an aggregate of (i) $1,000,000 in Callable
      Secured Convertible Notes (the “Notes”) and (ii) warrants to purchase 10,000,000
      shares of our common stock (the “Warrants”).





Pursuant
      to the Securities Purchase Agreement, the Investors will purchase the Notes
      and
      Warrants in two tranches as set forth below:





1.
            At
                closing on December 27, 2006
                (“Closing”), the Investors purchased Notes aggregating $600,000 and
                Warrants to purchase 10,000,000 shares of CMEG common
                stock;





2.
            Upon
                effectiveness of the
                Registration Statement, June 6, 2007, the Investors purchased Notes
                aggregating $400,000.





The
      Notes
      carry an interest rate of 8% per annum and a maturity date of December 27,
      2009.
      The notes are convertible into CMEG common shares at the applicable percentage
      of the average of the lowest three (3) trading prices for CMEG shares of common
      stock during the twenty (20) trading day period prior to conversion. The
“Applicable Percentage” means 50%; provided, however, that the Applicable
      Percentage shall be increased to (i) 55% in the event that a Registration
      Statement is filed within thirty (30) days of the closing.





At
      our
      option, we may prepay the Notes in the event that no event of default exists,
      there are a sufficient number of shares available for conversion of the Notes
      and the market price is at or below $.25 per share. In addition, in the event
      that the average daily price of the common stock, as reported by the reporting
      service, for each day of the month ending on any determination date is below
      $.25, we may prepay a portion of the outstanding principal amount of the Notes
      equal to 101% of the principal amount hereof divided by thirty-six (36) plus
      one
      month's interest. Exercise of this option will stay all conversions for the
      following month. The full principal amount of the Notes is due upon default
      under the terms of Notes. In addition, we have granted the Investors a security
      interest in substantially all of our assets and intellectual property as well
      as
      registration rights.





**Scorpion
      Bay LLC Notes**




In
      June
      2007, Camelot issued a note payable to Scorpion Bay, LLC for $300,000 which
      matured November 15, 2007.  Camelot issued a total of 11,800,000 shares of
      common stock with a fair market value of $357,400 for interest related to this
      note.  As the note matures, this amount is being recognized as interest
      expense.





16




**ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
      OR PLAN
      OF OPERATION** - continued





**RESULTS
      OF OPERATIONS**





*General*





Through
      our wholly owned subsidiary Camelot Films®, we have a history of operations as a
      film development, production and distribution company dating back to 1978.
      As a
      public company, we have a limited operating history. Our primary focus has
      been
      on the studio project since September 2005, as we consider that critical to
      our
      long term business. Prior to current management acquiring the Company in 2003,
      the predecessors’ business consisted primarily of attempting to provide support,
      organization and restructuring services to other development stage companies.
      We
      believe that due to the complete and drastic change in our business focus,
      period-to-period comparisons of our operating results are not necessarily
      meaningful and should not be relied on as an indication of future performance.
      However, it is still important that you review the audited financial statements,
      the unaudited interim financial statements and the related notes in addition
      to
      thoroughly reading our current plan of operations.


**PERIOD
      ENDED SEPTEMBER 30, 2007, COMPARED TO PERIOD ENDED SEPTEMBER 30,
      2006:**




The
      Company did not generate any revenue during the nine months ended,
      September 30, 2007.





All
      expenses incurred during the comparative periods were general and administrative
      in nature.





The
      Company has incurred $ 11,324,973 of general and administrative expenses since
      its inception. General and administrative expenses were $ 1,177,537 for
      the nine months ended September 30, 2007, respectively, compared to $
      591,743 for the nine months ended September 30, 2006. Increase in expenses
      primarily due to increase professional fees, rent, insurance and payroll
      expenses.





The
      general and general administrative expenses for the nine-month period were
      comprised of $ 342,500 of officers salaries and $ 304,717 of professional
      services and $253,200 professional (consulting, legal & accounting) fees.
      Other costs, $85,853 for trade show travel, marketing, seminars, telephone
      costs
      $12,376, rent $65,816, payroll expenses $41,230, insurance costs $38,099 and
      $90,000 other administrative costs These expenses were related to the pursuit
      of
      the Company’s plan of operation to produce and distribute motion
      pictures.




**LIQUIDITY
      AND CAPITAL RESOURCES**





Through
      our wholly owned subsidiary Camelot Films®, we have a history of operations as a
      film development, production and distribution company dating back to 1978.
      As a
      public company, we have a limited operating history. Our primary focus has
      been
      on the studio project since September 2005, as we consider that critical to
      our
      long term business. We believe that due to the complete and drastic change
      in
      our business focus, period-to-period comparisons of our operating results are
      not necessarily meaningful and should not be relied on as an indication of
      future performance.





Our
      current liquidity and capital resources are provided principally through our
      financing agreement with Eagle Consulting Group, Inc. (“Eagle”) which has since
      been transferred to The Atwell Group (“TAG”). We entered into an agreement with
      Eagle on March 28, 2003, to provide operational funding for the Company. In
      exchange for twenty percent (20%)of the Company’s outstanding common stock on a
      non-dilutive, continuing basis until the Company can secure additional financing
      from another source, TAG has agreed to provide funding for the Company’s annual
      audit, quarterly filings, accounts payable and other ongoing expenses including
      office, phones, business development, legal and accounting fees. For the nine
      months ended, September 30, 2007, TAG has advanced the Company a total of
      $81,624. The funding commitment from TAG will be able to cover all of our
      operating expenses for the remaining three months of 2007 and fiscal year
      2008.





Further,
      we sucessfully prepared an SB-2 registration statement that went effective
      in
      June 2007 for the purpose of funding the development of our initial slate of
      pictures, studio group costs and operations. Because the funding wass
      successful, it is our goal to have between 10 and 12 motion pictures in various
      stages of development or production within 12 months. In the event we are unable
      to complete the additional funding of our slate, we could have to delay our
      slate until such time as the necessary funding is acquired.





Like
      all
      motion picture production companies, our revenues and results of operations
      could be significantly dependent upon the timing of releases and the commercial
      success of the motion pictures we distribute, none of which can be predicted
      with certainty. Accordingly, our revenues and results of operations may
      fluctuate significantly from period to period, and the results of any one period
      may not be indicative of the results for any future periods. Similarly, the
      efficiencies we aim to realize through our model may not materialize. Failure
      of
      the efficiencies to materialize, along with other risks germane to the picture
      production, may cause us to produce fewer films than our plan calls
      for.





17


**ITEM
      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**- continued








**We
      expect to have a need for Additional Financing**





As
      of September 30, 2007, we had a working capital deficit of
      $973,487. Despite maintaining operations since taking control of the
      Company in 2003, and despite having secured financial commitments through fiscal
      year 2008, our history of recurring losses from operations raises a doubt about
      our ability to continue as a going concern if we are unable to continue to
      generate the necessary financial requirements in the future. There can be no
      assurance that we will have adequate capital resources to fund planned
      operations or that any additional funds will be available to us when needed,
      or
      if available, will be available on favorable terms or in amounts required by
      us.
      If we are unable to obtain adequate capital resources to fund our motion picture
      operations, it may be required to delay, scale back or eliminate some or all
      of
      our operations, which may have a material adverse effect on our business,
      results of operations and ability to operate as a going concern.





Our
      business requires a substantial investment of capital. The production,
      acquisition and distribution of motion pictures require a significant amount
      of
      capital. A significant amount of time may elapse between our expenditure of
      funds and the receipt of commercial revenues from our motion pictures, if any.
      This time lapse requires us to fund a significant portion of our capital
      requirements from private parties, institutions, and other sources. Although
      we
      intend to reduce the risks of our production exposure through strict financial
      guidelines and financial contributions from broadcasters, sub-distributors,
      tax
      shelters, government and industry programs and studios, we cannot assure you
      that we will be able to implement successfully these arrangements or that we
      will not be subject to substantial financial risks relating to the production,
      acquisition, completion and release of future motion pictures. If we increase
      our production slate or our production budgets, we may be required to increase
      overhead, make larger up-front payments to talent and consequently bear greater
      financial risks. Any of the foregoing could have a material adverse effect
      on
      our business, results of operations or financial condition.







**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





**FACTORS
      THAT MAY AFFECT FUTURE RESULTS**





**We
      have an Accumulated Deficit and we have a Limited History of Operations as
      a
      Motion Picture Company**





We
      have incurred losses in each operating period since our inception on October
      12,
      1999. Operating losses may continue, which could adversely affect financial
      results from operations and stockholder value, and there is a risk that we
      may
      never become profitable. While our wholly owned subsidiary Camelot Films® does
      have an operating history of operations as a motion picture company dating
      back
      to 1978, the Company has a limited history, having acquired Camelot Films® in
      2003.








**ITEM
      4. CONTROLS AND PROCEDURES**





In
      accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”), as of the end of the period covered by this
      Quarterly Report on Form 10-QSB, Camelot’s management evaluated, with the
      participation of Camelot’s principal executive officer and principal financial
      officer, the effectiveness of the design and operation of Camelot’s disclosure
      controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under
      the Exchange Act). Based on their evaluation of these disclosure controls and
      procedures, Camelot’s chief executive officer and Camelot’s chief financial
      officer have concluded that the disclosure controls and procedures were not
      effective as of the end of the period covered by this report. While conducting
      the review of the interim financial statements as of and for the period ended
      September 30, 2007, our independent auditors found numerous adjustments that
      indicated a material weakness in our controls over financial reporting. It
      is
      our plan with additional funding to devote more resources to this very critical
      function.




There
      has
      been no change in Camelot’s internal control over financial reporting that
      occurred during the quarter covered by this report that has materially affected,
      or is reasonably likely to materially affect, Camelot’s internal control over
      financial reporting.





It
      should
      be noted that any system of controls, however well designed and operated, can
      provide only reasonable, not absolute, assurance that the objectives of the
      system are met. In addition, the design of any control system is based in part
      upon certain assumptions about the likelihood of future events. Because of
      these
      and other inherent limitations of control systems, there can be no assurance
      that any design will succeed in achieving its stated goals under all potential
      future conditions, regardless how remote.












18





**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





NONE.





**ITEM
      2. CHANGE IN SECURITIES**





On
      March
      16, 2007, 5,000,000 common shares were issued to Nucore Industries, Inc. as
      a
      deposit for a funding deal for Camelot Entertainment Group, Inc, and it has
      been
      presented as a subscription receivable at March 31, 2007. As of September 30,
      2007, funding has not been received by the company. The stock has been stopped
      from any transfer and is currently being recalled from Nucore. The transaction
      with Nucore has been terminated due to lack of performance The funding
      contemplated by Nucore has never been publicized as the Company never received
      any funds, despite having executed contracts and stock in escrow.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





NONE





**ITEM
      4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES
      HOLDERS**





NONE




**ITEM
      5. OTHER INFORMATION**





Subsequent
      event: On April 30, 2007, the board of directors approved the increasing the
      number of authorized common and preferred shares of stock.





Authorized
      common shares were increased from 150,000,000 to 300,000,000 shares and number
      of authorized preferred shares were increased from 15,000,000 to
      30,000,000.





**ITEM
      6. EXHIBITS**




a.
      Exhibits





31.1
            Certificate
                of the Chief Executive Officer pursuant to Rule 13a-14(a) of the
                Exchange
                Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley
                Act
                of 2002





31.2
            Certificate
                of the Chief Financial Officer pursuant to Rule 13a-14(a) of the
                Exchange
                Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley
                Act
                of 2002





32.1
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




32.2
            Certification
                of Chief Financial
                Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section
                906 of the Sarbanes-Oxley Act of
                2002.


























19





**SIGNATURES**





In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      registrant has caused this report on Form 10-QSB to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.






CAMELOT
                  ENTERTAINMENT GROUP, INC.(Registrant)Date: November
                  19, 2007
            By:
            /s/ ROBERT
                  P. ATWELLTitle:
                  Chief Executive Officer




Date: November
                  19, 2007
            By:
            /s/ GEORGE
                  JACKSONTitle:
                  Chief Financial Officer

























20